Depakote® racketeering class action against Abbott Labs revived

By Linda O’Brien, J.D., LL.M.

The U.S. Court of Appeals in Chicago has reversed a district court’s dismissal of racketeering claims brought by multi-employer benefit plans and health services funds against Abbott Laboratories, after the company admitted to promoting the prescription drug Depakote® for off-label purposes and paid illegal kickbacks to health care professionals (Sidney Hillman Health Center of Rochester v. Abbott Laboratories, Inc., April 13, 2015, Tinder, J.).

Background. Depakote is a prescription drug developed by Abbott and approved by the Food and Drug Administration (FDA) for treating epileptic seizures, acute mania, particular absence seizures, and adult migraine prevention. In four previous consolidated qui tam actions filed between October 2007 and January 2010, Abbott admitted to knowingly promoting the sale and use of the drug for unapproved purposes. The company also admitted to paying illegal remuneration to health care professionals and long-term pharmacy providers for promoting Depakote for off-label uses, and agreed to pay $1.6 billion to resolve the criminal and civil claims in 2012.

The funds filed a putative class action suit in August 2013, alleging that Abbott, and its subdivision AbbVie, conducted a scheme to cause them and other third-party payors to pay for Depakote prescriptions in order to treat non-FDA approved conditions, in violation of Racketeering Influenced and Corrupt Organizations Act (RICO). In August 2014, the district court dismissed the case as barred by the statute of limitations. The funds appealed.

Statute of limitations. The appellate court found that the parties should have been allowed discovery into when a reasonable benefit fund should have known about its injuries from off-label marketing. Dismissal of the complaint as untimely at the pleading stage was an unusual step since the complaint was not required to anticipate and overcome affirmative defenses, such as the statute of limitations, the court noted. The district court’s dismissal of the complaint was not justified in this case. Even if the funds had the duty and ability to monitor off-label prescriptions, when the funds actually became aware that they were paying for off-label use was unclear and required factual determinations not appropriately made at the pleading stage.

There was insufficient information to determine when a reasonable third-party payor should have discovered that it had paid more for off-label uses that it otherwise would have due to the illegal marketing scheme, in the court’s view. Although sophisticated entities, such as the funds, have been held to a higher standard, the defendants were sophisticated as well and undertook significant effort to conceal the illegal marketing.

Equitable tolling. However, the district court properly determined that the doctrine of equitable estoppel did not toll the limitations period. The funds did not allege that they acted diligently in seeking information about their claims or attempt any investigation. Even if an SEC filing in 2009 disclosing the Department of Justice investigation into Abbott’s off-label marketing did not alert the funds to their injuries, the company’s 2012 guilty plea and $1.6 billion settlement did so. Yet the funds waited over a year to file suit. Thus, the appellate court was unpersuaded that the equitable doctrine applied to extend the limitations period.